Demand from E-commerce and Retail Set to Remain Strong into 2017

Growth in purchases of goods online exceeded expectations in 2015, growing from the previous year over 20% to over EUR 3 billion, according to information released through APEK, the association for e-commerce in Czech Republic. This has been increasingly refl ected in the demand for storage and distribution space where there has been a notable fl urry of leases since the announcement of Exiteria at the end of last year. According to Martin Šumera, head of industrial real estate at 108 Agency, which advised on these deals, the last quarter or more was especially busy. “The new hall for furniture e-retailer Exiteria, which took some 10,787 sqm of space in P3 Park D11 in Mstětice, opened at the beginning of June. We also signed with rohlik.cz, which is taking some 7,700 sqm in Westpoint in Prague 6, Mall.cz, which signed in May for a 20,000 sqm extension in Prologis Park Prague-Jirny, and Bonami, the Czech homewares
e-retailer, which is taking 5,795 sqm at Prologis Park Prague-Airport DC1, also in May.”The Bonami lease, which follows a lease by the Chinese e-shop Linemart in the same park in March, renders the speculatively built facility fully occupied. “The structure of demand for distribution centres in the Czech Republic is starting to change. While the automotive industry used to
be the dominant force, over the last two years the driver has been the retail segment, including e-commerce. Conversely, demand from logistics providers has been slightly receding,” points out
Šumera, noting that online retailers generally choose to govern logistics themselves.

Exiteria plans European growth

Exiteria – P3 park Prague D11

“The furniture segment of e-commerce is clearly in a growing phase,” says Michal Bezděka, head of industrial agency at CBRE. “People are overcoming their resistance to buying larger,
more long-lasting items such as furniture online. Electronics was the early driver and still today the main one, then came white goods, and textiles of course. Now it’s furniture as well and
I think it will continue to grow.”

Exiteria, the mother company of online-only brands including MT-nábytek (MT-nábytok in Slovakia) and Mabyt reports that in 2014 MT-nábytek sold to 27,000 households while in 2015 that number more than doubled to 62,000 households. With the new distribution facility now added in Mstětice, the e-retailer’s network has extra capacity to handle both future growth and the introduction of other products, said the company’s spokesperson Petra Triščíková. “The existing warehouse in Rousínov u Brna (10,000 sqm) will continue to serve Moravia and Slovakia and once operational
the new distribution centre in Prague will serve Bohemia,” she pointed out, adding that the aim is to ultimately serve other EU countries including Western Europe. The newly opened hall has classic unloading ramps installed to Exiteria requirements.

Exiteria – P3 Prague D11

“Above each ramp will be an information screen connected to the information system. From the unloading of goods into the warehouse to the final handling of goods for delivery to the customer, it will be a controlled process of the flow of goods with shared information,” explained Jiří Kolínský, Exiteria’s manager of operations. Exiteria has served the Slovak market since 2012, while the Hungarian e-shop business, operational since February 2016, is served from an office and warehouse complex in Törökbálint, southwest of Budapest. “So far we have a warehouse of 500 sqm and it will soon be greater.”

Planned expansion in several segments

While strategies are being evaluated by individual retailers, e-commerce is set to grow across sectors. “We see some consolidations in the market among a large e-commerce players: Mall.cz, which is done, Alza, which progresses in phases, and HP Tronic, which has consolidation planned. Additional existing e-shops are planning future expansions, for example (online fashion e-retailer) Zoot and Sportisimo (not a pure e-shop, but which is expanding quite significantly in Rudná),” says Petr Zaoral, director of industrial agency at Colliers. IKEA is also considering
its foray into e-retailing. “From our information it would seem they are starting in Ireland, and GB will follow; Czech Republic is currently scheduled to go live in approx 2.5 years but
in the meantime the company will try to go for a ‘click & collect’ concept (i.e. you shop online but have to pick up the goods at the store). The food segment is also strong. In addition to
Rohlik.cz, Tesco is selling fresh food through its e-shop, and Lidl has also contracted for new facilities,” notes Zaoral. Lidl signed a contract in March for its e-retailing operations in CTP
Plzeň for a 30,000 sqm hall (including expansion), which will be a renovation of an existing building. “We are also working with some large local e-commerce players not Mall or Alza but
their competitors; they are looking for space but are currently preparing their strategy for next year, which should be done this summer. So we certainly don’t expect to see the e-commerce
trend slowing down in 2016, and next year also, particularly in the electronics space.” Fashion retailer H&M is also seeing strong demand in its eshop points out Kateřina Papežová, PR manager.
The e-commerce business was launched in CEE countries by H&M in spring last year and required additional logistics facilities in Poznaň, the main distribution centre for the CEE region, she pointed out. Chinese internet retailer Alibaba is also said to be in the process of arranging a distribution centre in CR, in Cheb. JLL is said to be the agent advising. JLL declined to comment on the arrangement. “We have heard that it’s for a lease of 40,000 sqm,” said one source in the industrial sector in Prague.

Demand in traditional retail

Not all of signifi cant demand for warehouse space being recorded is pure e-commerce. Tchibo will have a new 74,000 sqm distribution centre in Cheb. Construction has started, and market sources say that the company plans expansion in two years for another 30,000 sqm. The German based company choosing CR for its business is a good example of big foreign firms setting up distribution where space and labour are less expensive. “In the last four or fi ve months traditional retail has been worthy of attention. We’ve seen projects done by companies such as Kaufland (in Prague and Olomouc last December, totalling almost 9,000 sqm), and there is some speculation about other big players; those will probably have an infl uence on the whole set of data much more than we expected,” says Bezděka. The sentiment is backed up by others. “We’re just now in progress with three other players, not just e-commerce. We can expect two in food industry and one in the ‘high and heavy’ industry,” says Zaoral, adding that they’re all in excess of 10,000 sqm and deals are expected possibly by end of year, or in early 2017. “One of them in food is a foreign company which will do a fi rst phase as a pilot project here; if everything is functional in terms of logistics (because customers are in Germany) they will then continue with approximately another 30,000 sqm of new facilities.”

There have also been rumours that the furniture retailer XXXLutz is scouting the Czech Republic for a new hall. “They were allegedly planning a 100,000 sqm warehouse. We will see when that will happen,” said Zaoral. “According to our information it could be as much as 150,000 sqm,” said another source following the sector in Prague. Either way the size of that requirement
is signifi cant, as Bezděka points out: “There are so few parks where you could build something so huge, that it’s not really about choosing a particular location in CR, it’s more about actually fi nding a site that would suit, so they were essentially looking all over the country trying to fi nd a location. According to our information, they’re not looking anymore, but it could be that they put it temporarily on hold and are looking instead in Poland, Germany or Austria, for example.” The sentiment is echoed by other agents. Zaoral adds that the furniture retailer may be also examining other options such as using third-party logistics providers.